Oracle Misses Due to USD Strength; Shares Overvalued As We Think Oracle Faces Stiff Competition

In its first quarter with Cerner under its wing, Oracle beat the company’s high end of guidance on the top line (in constant currency terms), but due to strength in the U.S. dollar, non-GAAP EPS came in slightly under management’s guided range. While the outlook is healthy amid further currency headwinds to come, we continue to be more cautious on Oracle’s long-term potential. We are maintaining our fair value estimate for the narrow-moat stock at $67 per share. With shares up slightly after hours, near $78, this leaves the negative-trend company overvalued, in our view. Altogether, we believe that the market is overestimating the share Oracle can take of the database management market of the future—which we believe will pertain increasingly to nonrelational workloads outside of Oracle’s wheelhouse.